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Europe Makes a Comeback

Sep 07, 2013 | 02:00 PM EDT

This article originally appeared Sept. 6, 2013, on Real Money. To read more content like this, + see inside Jim Cramer's multi-million dollar portfolio for FREE Click Here NOW.

After 18 months of contraction, the 17-nation eurozone economy is showing signs of life.

It left recession behind by growing 1.2% on an annualized rate in the second quarter, a bit better than the 0.8% growth forecast by economists. Germany's economy grew at a 2.8% annualized rate, while France's was up at a 2.0% rate.

Not all economies in the zone expanded. Spain's shrank by a 0.4% rate, but that was better than the 2.0% drop in the first quarter. Cyprus sported the worst showing, falling 5.6%. Portugal, one of the sicker of the euro zone members, had the best record, growing at a surprisingly strong 4.4% rate.

The European Union is certainly not out of the (economic) woods. Unemployment is just over 12% and there is plenty of government and bank debt to cause any number of problems. But after enduring its longest recession ever (six quarters), growth of any size has to be considered good news.

Where there is good economic news, there are good investment opportunities. Employing the guru strategies I rely on to find stocks, I can report on two European companies that present solid prospects for virtually any investor. My guru strategies are based on the writings of some of Wall Street's greatest thinkers, which I computerized. Using these, I can automatically screen any stock to see if it meets the highest standards of any of my strategies.

The strategy that currently favors European companies is based on the writings of James P. O'Shaughnessy. The 10th anniversary of my following most of these strategies occurred on July 15, so I can now report a full decade's worth of performance. The O'Shaughnessy-based strategy is a proven winner. During the past 10 years, as the S&P 500 produced a 5.3% annual return, the O'Shaughnessy strategy nearly doubled that benchmark with a 10.0% annual return.

The strategy runs four tests. Those companies that get over these hurdles are then subjected to one additional test, which is dividend yield. The strategy picks only the top 50 stocks among those that pass its four tests and have the highest dividend yield.